Question

“Domestic income is always less than national income.”
Do you agree with the given statement? Support your answer with valid arguments.

Hint:

Remember: National Income = Domestic Income + Net Factor Income from Abroad. If NFIA is positive, National Income>Domestic Income.

Answer 1

The statement is mostly accurate. Domestic income (also known as Domestic Product or NDP at Factor Cost) represents the income earned by both residents and non-residents within a country's borders. National income encompasses the income earned by a country's residents, both domestically and internationally. Here's a breakdown:
Domestic Income: Income generated within a country's geographical limits, including earnings of residents and non-residents.
National Income: Income earned by a country's residents, both within the country and from foreign sources; it excludes income earned by foreign residents within the country.
Net Factor Income from Abroad (NFIA): This is the key difference: National Income = Domestic Income + NFIA.
Typically, NFIA is positive for India due to remittances and profits sent back to India by Indian residents working overseas, boosting national income.
In summary: National income generally exceeds domestic income because NFIA is usually positive.